Hatoyama's first stimulus plan includes 3.5 trillion yen to help regions, 600 billion yen for employment and 800 billion yen on environmental initiatives, the Cabinet said today in a statement in Tokyo. The measures had been delayed because of haggling within the coalition government.

The package came a week after the Bank of Japan released a 10 trillion yen credit program in response to government calls for it to counter deflation and a surging yen. Analysts said today's measures may provide at least a temporary boost for the world's second-largest economy, which emerged from its worst postwar recession in the second quarter.

"I give it 50 points out of 100," said Masaaki Kanno, chief economist in Tokyo at JPMorgan Securities Japan Co. and a former central bank official. The package "will be effective in easing strains on an economy struggling with deflation and a lack of demand, but it won't boost growth potential in the medium to long term."

The yen has weakened since climbing to a 14-year high of 84.83 against the dollar on Nov. 27. The Japanese currency traded at 88.83 at 2:20 p.m. in Tokyo from 88.99 before the announcement. The Nikkei 225 Stock Average fell 0.5 percent, heading for its first decline in more than a week.

Deflation Risk"Risk factors include a deterioration in employment conditions, sluggish demand because of deflationary pressure, a rise in long-term interest rates and movements in the currency markets," the statement said. Abrupt foreign- exchange moves may have a "considerable adverse impact on the economic recovery."

Japanese policy makers are adding stimulus measures just as their counterparts around the world consider withdrawing them. Deputy Prime Minister Naoto Kan said today that the central bank's Dec. 1 credit easing had a "considerable impact" on weakening the yen.

Japan has compiled four stimulus plans since September 2008 totaling more than 29 trillion yen ($326 billion). That compares with the U.S.'s $787 billion and China's $586 billion.

Kamei's CallThe People's New Party, a junior coalition member headed by Financial Services Minister Shizuka Kamei, blocked the stimulus last week, calling for a larger package to defeat deflation. Coalition parties agreed to boost the size of the measures by 100 billion yen to accommodate the request.

Today's package includes 3 trillion yen in tax grants to local governments to make up for a revenue shortfall. The government will pay for the tax breaks by selling deficit- covering bonds.

Some 1.2 trillion yen will be used to expand emergency credit for small and midsized businesses, provide safety-net loans and reduce interest rates on lending.

The package extends a program initiated by the previous administration giving consumers incentives to purchase eco- friendly cars and home appliances. It also introduced incentives to install energy-saving equipment in homes.

The employment measures will make it easier for companies to obtain subsidies to keep workers when cutting production.

Willing to Act"The scale of the stimulus package itself isn't that impressive, but it shows that the Japanese government is willing to take action, relieving recent worries that it will just sit there," said Takeshi Osawa, a senior fund manager in Tokyo at Norinchukin Zenkyoren Asset Management Co.

About 2.7 trillion yen of the package will be paid for with funds frozen from the previous administration's extra budget. The government wants to avoid selling new bonds "as much as possible," the statement said.

Japan has the world's largest public debt, with liabilities that are approaching twice the size of the economy.

Finance Minister Hirohisa Fujii said bond sales for the current fiscal year will exceed tax revenue for the first time in 63 years. The government will sell 53.5 trillion yen in bonds, more than the 44 trillion yen budgeted in April, he said. Tax revenue will slump to 36.9 trillion yen, less than the 46 trillion yen projected.

Sliding PopularityThe premier's sliding popularity may hurt his party's momentum ahead of upper house elections in July 2010. His approval rating fell below 60 percent for the first time, declining to 59 percent from last month's 63 percent, the Yomiuri newspaper reported yesterday.

Japan's exports fell at the slowest pace in a year in October as worldwide government spending spurred demand for the nation's products, a Finance Ministry report showed today. That helped the trade surplus expand 42.7 percent from a year earlier to 1.4 trillion yen. Corporate bankruptcies fell 11.4 percent in November to their lowest level in almost two years, Tokyo Shoko Research Ltd. said.

Other recent figures show the expansion may be weakening. Industrial production advanced at the slowest pace in eight months in October, wages slid for a 17th month, and consumer prices fell a near-record 2.2 percent.

Gross domestic product rose at an annual 2.8 percent rate in the three months ended Sept. 30, according to the median estimate of 17 economists surveyed by Bloomberg News ahead of revised figures due tomorrow. That would be slower than the 4.8 percent the Cabinet Office initially reported, reflecting figures last week that showed companies cut capital spending at a record pace in the period.

To contact the reporters on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net; Keiko Ujikane in Tokyo at kujikane@bloomberg.net.